When reviewing bank statements, what does Heidi need to do if she has large withdrawals for unexpected expenses?

Providing a Letter of Explanation is crucial when dealing with large withdrawals from bank statements, especially in the context of pre-purchase assessments. Such letters help clarify the reasons behind significant financial activities that may raise questions during the review process. This is particularly important because lenders and financial institutions are often concerned about unusual spending patterns, which can indicate financial instability or risk.

In the event of unexpected expenses leading to these withdrawals, a Letter of Explanation demonstrates transparency and accountability. It also serves to reassure the lender of Heidi's financial management and planned budgeting, allowing for a smoother review process as the underwriter assesses her financial situation.

The other options do have merit in different contexts, but they do not provide the same level of clarity and reassurance that a Letter of Explanation does in this scenario. Documenting expenses with receipts is generally a good practice for personal records, but it may not directly address the needs of the lender. Simply stating that nobody needs to review these transactions overlooks the importance that lenders place on understanding a borrower's financial behavior. Furthermore, limiting explanations to only withdrawals above a specific threshold can be misleading, as even smaller transactions can impact a financial review.